The Sequence Opinion #872: The Cake Is a Battlefield: Who Really Controls the AI Stack

2026-06-04 · Source: TheSequence · Field: Technology & Digital — Artificial Intelligence & Machine Learning, Emerging Technologies & Innovation · Depth: Intermediate, quick

Summary

Jensen Huang describes the AI stack as a harmonious five-layer cake comprising energy, chips, infrastructure, models, and applications, where each layer mutually reinforces the others, driving demand from applications down to power plants. However, a strategic perspective views this same structure as a battlefield of five distinct margin pools. This alternative interpretation suggests a constant struggle to integrate layers vertically before underlying components become commoditized. The critical strategic inquiry shifts from merely owning multiple layers to identifying and controlling the truly scarce layer and its adjacent interface within this competitive vertical axis.

Key takeaway

For CTOs and investors evaluating AI ventures, recognize that the AI stack is a competitive landscape where control hinges on owning the scarce layer and its immediate interface, not just accumulating layers. Your strategic focus should be on identifying which components are truly defensible against commoditization and where value capture is most concentrated. Prioritize investments that secure these critical choke points to maintain long-term competitive advantage.

Key insights

The AI stack is a competitive battlefield of margin pools, not a harmonious structure, with scarcity determining control.

Principles

• The AI stack consists of five distinct, vertically integrated margin pools.
• Strategic advantage lies in owning the scarce layer and its adjacent interface.
• Layers are subject to commoditization from below.

Topics

• AI Stack
• NVIDIA Strategy
• Market Scarcity
• Vertical Integration
• Competitive Strategy
• AI Infrastructure

Best for: VP of Engineering/Data, Executive, Entrepreneur, Director of AI/ML, CTO, Investor

Related on AIssential

• The Updated Map of AI — AI industry leaders are vertically integrating across infrastructure, models, and distribution, consolidating power.
• Elon Musk Offered $60 Billion for Cursor That Made $2 Billion, But WHY? | Front Page — Strategic acquisitions prioritize future AI stack integration and compute potential over current revenue.
• The AI Stack Wars — Major tech companies are betting on different AI stack layers for future value accrual.
• On Dwarkesh Patel's Podcast With Nvidia CEO Jensen Huang — Nvidia's CEO prioritizes market share over national security in AI chip export policy, revealing a disconnect on AI's strategic implications.
• The Great Platform Reckoning: Will A System Of Record Save SaaS? — AI agents are dismantling traditional software moats, forcing a re-evaluation of tech stacks as strategic risk.
• Nvidia’s AI empire: A look at its top startup investments — Nvidia is aggressively expanding the AI ecosystem through strategic venture capital investments in key startups.

Open in AIssential →

Editorial summary, takeaway, and curation by AIssential. Original article published by TheSequence.